This paper examines the country and industry effects on the cross-sectional variance of firms’ equity return in the Association of Southeast Asian Nations (ASEAN) member countries. Using the model developed by Heston and Rouwenhorst (1994), this article covers five ASEAN countries and ten industries. We find that pure country effects are, on average, more important than pure industry effects in explaining equity return variation of ASEAN firms. In terms of portfolio diversification strategies in ASEAN, our results show that country diversification is a more effective strategy for risk management than industry diversification. We also discuss the impacts of subprime mortgage crisis on ASEAN countries and industries.